Wednesday, September 16, 2009

Savvy shippers using 3PLs to squeeze out costs

A new study indicates that smaller and midsize companies are increasingly turning to third party logistics providers (3PLs) as a way to enhance their profitability in today’s increasingly challenging economy – discovering a strategy which the largest corporations have utilized for years.

“In the current recessionary environment, companies are looking more and more to cut costs and are looking at logistics outsourcing as a way to reduce costs,” said a report from Armstrong & Associates, a Wisconsin-based consulting firm. “We’re seeing it especially with small and mid-sized companies that previously hadn’t considered outsourcing.”

As a result, the 3PL industry has emerged as a counter-cyclical business category which has posted strong numbers in the face of economic turmoil, growing 5.5 percent in 2008 and projected to add another 4.5 percent in the coming year.

In 2001, 73% of the Fortune 100 used 3PLs, a percentage which jumped to 93% by 2008. Of the firms ranked 401–500 (and we’re still not talking about small business here), 3PL usage went from just 24% in 2001 all the way up to 65% in 2008. Across the board, the smaller the firm, the greater the growth in use of outsourced logistics services. The complete breakdown is included below.

With cash tight and funds for new initiatives hard to come by, bringing in an outside expert to see if shipping can be done cheaper, faster, or better can be a no-cost way to drive significant savings to the bottom line – and for a smart manager to emerge as something of a hero.

About TOTALogistix

TOTALogistix is a privately held corporation headquartered in Sparta, NJ. We helped define the Third Party Logistics Industry in 1991. Today we provide a wide spectrum of transportation and related supply chain management services to manufacturers, retailers and distributors throughout North America.
In our 20+ years in business, we’ve saved money for nine out of ten companies whose transportation we’ve analyzed. We’re confident we can do the same for you. Improving logistics performance starts here.